BUENOS AIRES – Argentina and economic crisis, it can sometimes seem, have been conjoined since the country’s birth, like Siamese twins. In fact, Argentina is the only developed country that has succeeded, in the period from World War II until today, in mismanaging its way out of the First World.
But, for all their failings, Argentina’s ruling elites have never been short on “attitude,” viewing their country as the equal of the world’s strongest, and thus never afraid to stand up to them all.
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It is fighting words in Buenos Aires, for instance, to suggest that Argentine soccer is not the best in the world, though it has managed to win the World Cup only twice, behind Brazil (five), Italy (four), and Germany (three) – and matched by its tiny neighbor, Uruguay. While many experts, players, and fans rank Brazil’s Pelé as the best soccer player of all time, it is wise not to dispute the local insistence that either Maradona or Lionel Messi, two local boys, is better.

Recently, in a taxi in Hong Kong, of all places, a young tango dancer from Buenos Aires was visibly agitated at his host when Brazilian football was put ahead of his country’s game.
Such bravura, or chutzpah, has enabled current President Cristina Fernández de Kirchner to insist that inflation in Argentina – currently rampaging well above 20% – remains in the single digits. In 2007, Fernández replaced professional statisticians at the National Statistics and Censuses Institute with political appointees when the Institute began to publish inflation rates that were accelerating alarmingly. Ever since, official numbers and reality have parted ways.

Moreover, academic and private-sector economists have been warned that publishing different figures could result in criminal prosecution for spreading false rumors. In fact, one academic was fined $125,000 for publishing inflation figures that were substantially higher than official data indicated.
Of course, when you control the official statistics office, you can claim any inflation rate you want; but that does not lower the price of bread. Anyone who buys food in supermarkets or uses a taxi knows that the true rate of annual inflation over the past several years has been 20-30%. Clearly, the market has reached its own verdict, reflected in the gap between the official exchange rate of 4.6 Argentine pesos to the dollar and the black-market rate, which recently reached 6.8, with some economists whispering that an eight-peso dollar is likely before too long.

Not only has Argentina repudiated the $100 billion in foreign debt on which it defaulted a decade ago; it has also shrugged off criticism of its expropriation in April of the Spanish oil company Repsol. Argentina has offered to compensate the company at “fair” market value, to be determined at some future date – presumably when the floor has dropped out of Repsol’s share price, which initially plunged nearly 60% from its previous high, and is still down 40%.

Even as evidence of economic crisis continues to mount – the latest sign being that supermarket shoppers are limited to one bottle of cooking oil per customer – the government gives no indication of concern. The authorities have defied the International Monetary Fund, defaulted on debts, and proudly proclaimed that Argentina has transcended traditional economics. The government is still “negotiating” with the IMF on how best to collect, measure, and report inflation, as if this were not done routinely by trained statisticians throughout the world.

Argentina’s prideful attitude may have led it to become a second-rate economy, but the same attitude has served it well in its one great and unique contribution to world culture: tango, recognized by UNESCO as part of the world’s “intangible cultural heritage.”

Year after year at the annual World Tango Competition, Argentine dancers dominate the top ranks of Stage Tango, more glamorous and difficult than the other category, Salon Tango. This year was no different. The top three pairs were all from Argentina.

Dancing tango well is not just a matter of technical skill, which can be learned by others. The Japanese are unequaled masters of such skills, and have been competing since the beginning of international tango competitions in 2003. In 2009, a Japanese couple, Hiroshi and Kyoko Yamao, made history by winning the championship in Salon Tango, in which a loving connection between the dancers is more important than a haughty attitude. In Stage Tango, where that attitude is paramount, only once has a Japanese woman, Chizuko Kuwamoto, managed to reach the top – and only by dancing with an Argentine partner.
Juan Fabbri, the owner of Tango Porteno and Esquina Carlos Gardel, the two most expensive and important tango clubs in Buenos Aires, believes that what foreigners (including me, a student of tango for years) are missing is the “El Cachafaz” factor. El Cachafaz was the nickname of a legendary early-twentieth-century dancer – José "Benito" Bianquet. The word, from the ghetto dialect of “lunfardo,” evokes “impudence, danger, manliness, mischief, and shamelessness.”

Mario Morales, a top tango choreographer, who has trained a string of tango champions, put it to me slightly differently. “To dance tango well, you need corazon (heart) and passion. Foreigners are more circumspect. We Argentines put our hearts first and maybe think later.”

That insight arguably provides the best explanation of why Argentina excels at tango – and why it is failing to remain in the First World, where it once belonged.

Buenos Aires – For 20 years, Americans have denounced the “crony capitalism” of Third World countries, especially in Asia. But, just as those regions have been improving their public and corporate governance – Hong Kong just witnessed a breakthrough court decision against a telecom tycoon who is the son of the province’s richest and most powerful man – crony capitalism is taking root in the United States, a country that the world long considered the gold standard of a level playing field in business. The recently completed “stress tests” of US banks are but the latest indication that crony capitalists have now captured Washington, DC.
It is no surprise that stock markets liked the results of the stress tests that US Treasury Secretary Timothy Geithner administered to America’s big banks, for the general outcome had been leaked weeks before. Indeed, most professional investors trashed the tests as dishonest even as their holdings benefited from a rising market.
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Even The Wall Street Journal , usually financial markets’ loudest cheerleader, openly disparaged the tests’ integrity. The government had allowed bankers to “negotiate” the results, like a student taking a final examination and then negotiating her grade.
The tests were supposed to reveal the true conditions of banks saddled with unaudited toxic assets in housing loans and financial derivatives. The reasoning behind the tests seemed unimpeachable. But was it?
As any seasoned banker knows, a well-managed bank should undertake internal “stress tests” regularly as a matter of good housekeeping. The financial crisis should have mandated a running stress test to keep senior management up to date daily. Why, then, did the US need the government to conduct a financial exercise that bankers themselves could and should have done far better and faster?
The truth is that the tests were not designed to find answers. Both Wall Street’s chieftains and the Obama administration already knew the truth. They knew that if the true conditions at many big banks were publicly revealed, many would have been immediately declared bankrupt, necessitating government receivership to stop a tsunami of bank runs.
But the Obama administration did not want to be tagged as “socialist” for nationalizing banks, however temporarily, even though experts such as former US Federal Reserve Chairman Paul Volcker had recommended just that. Moreover, nationalizing banks would have required dismissing Wall Street captains and their boards for grossly mismanaging their firms.
Wall Street’s titans, however, had convinced Obama and his team that their continued stewardship was essential to getting the world out of its crisis. They successfully portrayed themselves as victims of a firestorm, rather than as accessories to arson.
Geithner and Larry Summers, Obama’s chief economic advisor, share Wall Street’s culture as protégés of Robert Rubin, the former treasury secretary who went on to serve as a director and senior counselor at Citigroup. Neither man found it difficult to accept the bankers’ absurd logic.
The stress tests were meant to signal to the public that there was no immediate threat of bank failures. This message, it was hoped, would stabilize the market so that prices for “toxic” assets could rise to a level at which bankers might feel comfortable selling them. After all, senior bankers had been claiming that these assets were “mispriced,” and that pricing them at market levels would penalize the banks unnecessarily.
So far, Geithner seems to have succeeded in his “tests,” as the stock market has indeed more than stabilized, with prices of bank shares such as Citigroup and Bank of America quadrupling from their lows. The feared implosion of Wall Street seems to have been avoided.
But no one ever seriously thought that the US would allow Citigroup and Bank of America, to name just two, to fail. In fact, the stock market bottomed out last winter. Markets had factored into share prices the belief that the US government would not allow any more banks to collapse.
What the world wanted was an accurate picture of what the banks were worth and “mark-to-market” valuations to guide investors as to how much new capital they needed.
The world also wanted to see the US retaking the high road in reinforcing business ethics and integrity – so lacking under the last administration. As taxpayers had already put huge sums into rescuing failing banks, with the prospect of more to come, a transparent process to reveal how the money was being used was imperative.
Substantial public rescue funds have reportedly been siphoned off to foreign banks, Goldman Sachs, and staff bonuses for purposes unrelated to protecting public interests. None of this was either revealed or debunked by Geithner’s tests. Instead, public servants now appear to be in cahoots with Wall Street to engineer an artificial aura of profitability.
Moreover, the value of toxic assets remains as murky as ever. Once sacrosanct accounting principles have been amended at Wall Street’s behest in order to allow banks to report essentially whatever they want. And now negotiated stress test results have been released to “prove” that the banks are a lot healthier. Calling this a Ponzi scheme might be too harsh. But few financial professionals have been fooled.
Meanwhile, Wall Street chieftains and their boards of directors have nothing to fear from government. On the contrary, they are now the government’s partners in a joint venture to manage this dishonest scheme.
Like swine flu, crony capitalism has migrated from corrupt Third World countries to America, once the citadel of sound public and private governance. Is it any wonder that China is perceived as an increasingly credible model for much of the developing world, while the US is now viewed as a symbol of hypocrisy and double standards?

Byline: Smart investors would do well to ignore the exuberance over the latest surge in stock markets, writes Sin-ming Shaw



Stock markets are suddenly showing signs of breaking out from their respective lows reached late last year. As of Wednesday, the Hang Seng Index was up more than 40 per cent, the Dow Jones, 21 per cent and the Nikkei, 32 per cent. These broad indices mask even more impressive performance of individual stocks.

China Life, in an industry plagued by the implosion of American giant AIG, is up 60 per cent from its low. Bank of East Asia, hurt by rumours and by a rogue trader, is up 44 per cent.

Shipping stocks have staged a comeback that seems to ignore all the daily bad news about slower world trade. Former chief executive Tung Chee-hwa's flagship company, OOIL, at HK$19.60 on Wednesday, is up almost 100 per cent from its October low of HK$9.92.

What is going on? Do investors read the same papers as we do? Are we not watching the greatest meltdown since the Great Depression, with shrinking world trade and massive deleveraging of banks and companies? The economic realities remain depressing and grim. China, the "factory of the world", is facing its largest economic challenge since 1949. Factories are dropping like flies. Those that are surviving face a Hobson's choice: if you accept an order, the buyer might default but, if you don't take it, production must be cut and workers fired.

Property prices in Hong Kong, London and elsewhere are down between 30 per cent and 50 per cent. Interest rates are already close to zero but deflation in the US is at minus 13 per cent per annum, indicating lower rates are not having a positive effect on consumer behaviour. Banks flush with liquidity are afraid to lend as they are unsure whether the borrowers are creditworthy.

Nouriel Roubini, a professor at New York University, was one of the few academics to predict the crisis, yet his warnings were disastrously dismissed as drivel by Wall Street. He is predicting an "uglier" 2009. So are stock markets irrational again? Think of a play with three acts.

Act One consists of the financial meltdown, with stock markets plunging and Wall Street and parts of Main Street decimated. That act is drawing to a close, if it hasn't done so already.

Act Two is unfolding, with Main Street melting down at a speed substantially slower than that of Wall Street. The very nature of engaging in making "real" things in factories - moving industrial materials around the world to be made into parts and then assembled into a product to be distributed to global sales points - means that the process takes longer to start and is slower to unwind. We are far from at its end right now. Professor Roubini was spot on about it getting "uglier" in this respect.

Act Three is what the stock market investors are turning their sights to: highly inflationary policies pursued by governments around the world. They are keeping the money printing press running around the clock and are announcing massive "New Deal"-type programmes.

The popular press has crowned US president-elect Barack Obama a modern-day Franklin D. Roosevelt whose historic New Deal helped get the US out of the Great Depression.

Governments around the world have finally understood that the deadly combination of US housing folly and Wall Street machinations was not a localised US phenomenon. They are now acting to save their own countries.

Zero interest rates alone have proved to be inadequate. John Maynard Keynes long ago warned that a "liquidity trap" in a depression would require massive government action. Japan, in the 1980s, found itself in the same trap with a lethargic government politically unable to inflate the economy through massive spending.

These days, public policymakers are less restrained. Mr Obama has chosen as his close economic advisers experts on the Great Depression. Larry Summers, Mr Obama's top adviser, chastened after years of complacency regarding the stability of the US financial system, has urged Mr Obama to err on the side of "overspending". US federal deficits are now projected to be well over US$1 trillion for 2009 and probably in 2010.

So Act Three is music to the ears of the financial markets. In this script, the world economy should get back on an even keel in less than a year, saving it from a lethal hard landing. Some experts expect the global economy to hit bottom by, at latest, the fourth quarter of this year.

Should retail investors jump back into stocks with both feet, assuming the current budding exuberance is on the mark?

Is the market going to go higher in the months to come? Lee Shau-kee, who made his fortune selling apartments in Hong Kong's rigged property market and was once nicknamed "Asia's Warren Buffett" has now humbly disowned that honorific because he has fallen flat too often with his flawed forecasts.

Before regaining our exuberance, we should remember what the real Warren Buffett said long ago: every minute spent guessing what the markets will do is a minute wasted. He made his reputation and fortune by focusing on company realities. He finds great companies selling at reasonable prices, rather than guessing what market indices will do. It pays to remember his words.

Sin-ming Shaw is a former professional investor

Argentina's national dance is enjoying a worldwide surge of popularity both as a dramatic, musical spectacle and as a sensual game for two players

Juan and Delores Fabbri, the owner and artistic director of Esquina Carlos Gardel, a swanky tango club in Buenos Aires. Dana Frigoli and Pablo Villaraza, dancers and founders of DNI Studio, famous for creative "nuevo" tango.

What better time in Thailand than now to think about something apolitical, something romantic, pleasing, fun and yet at the same time melancholic? What better than the Argentine tango?

To a growing community of aficionados around the world, tango is Argentine tango, not the ballroom kind danced to a regimented step count and distinguished by its snapping head movements and stiff, formal posture. In the Argentine tango, dancers hold each other in a tender embrace. When the couple dance well, it is elegance at its most sensuous.

Argentina is an immigrant country with deep Spanish roots, but there are also Italians, English, Germans and a growing community of Japanese and Chinese, mainly from Taiwan. With few native in habitants remaining, Argentina today is the most European of all the South American countries.

And, yes, there are even Thais. Two, to be exact, in all of Mendoza, the third largest city and the wine producing capital of the country. I met them both working at the Hyatt Mendoza, where they are sought after as masseurs by international travellers who know what a good massage should feel like. There are certainly Thai restaurants in the capital, Buenos Aires, though strangely, Argentines do not take to spicy food as Europeans do.

Argentina may not be for everyone, especially those used to a no-nonsense business culture where efficiency is often prized above other human values. The supercharged businessmen in Hong Kong or New York would find the country maddeningly laid back. On the other hand, Thais would probably love it.

To appreciate Argentina you must love food, wine, laughter and above all you must want to be seduced by tango. The late, great tango maestro Carlos Gavito described tango as "two people caressing music with their bodies".

Tango is back in vogue around the world after decades of hiatus, and Buenos Aires is the tango capital of the world. There is even a gay tango club. Salon tango is the most traditional style and remains to most dancers the gold standard. Stage tango is for performance in a show, hence the name.

Then there is the nuevo, or new tango, which many younger dancers around the world have taken to like ducks to water. The style is more playful and less exact than salon tango where the "walk" requires years to perfect.

The young dancers don't care for the term nuevo as they consider it pejorative; in their mind this is just the same as traditional as salon tango. They claim a less restrictive form was how tango was originally danced before stricter discipline was imposed in later years by dancers with ballet training. Yet I find the label nuevo tango apt and complimentary. Why not?

Tango teachers in Buenos Aires are plentiful and their fees are more than reasonable - unlike in Hong Kong where unscrupulous carpetbaggers often prey on the vanity of the bored rich, charging exorbitant tuition and treating the students as mindless ATMs. In one celebrated case a wealthy banker agreed to pay US$15 million to her dance teacher for 6 years. She sued successfully to have half of her contractual payment returned because the teacher had called her "a lazy cow".

In Buenos Aires the top maestros charge US$100 an hour, although they will often charge $5 to $10 a person for two hours in group lessons in a public dance studio open to all comers. As one master explained: "We want to keep the art of tango alive by teaching to those who cannot afford private lessons."

Where does the novice even begin to search for a good teacher? The tango publication El Tangauta, http://www.eltangauta.com is a good place to start. The government also has a helpful site in English at http://www.tangodata.gov.ar/ingles. In Buenos Aires you can take lessons from world-famous maestro Osvaldo Zotto (http://www.zottoermocida.com.ar) whose brother Miguel Zotto, travelled throughout Asia to perform to sell-out shows.

Another world-class dancer is Mora Godoy (http://www.zottoermocida.com.ar) who, like all female tango dancers, was trained in classical ballet. Her partner is the darkly handsome Junior Cervila who made his debut in the classic movie Tango featuring some of the best-known living tango dancers today.

For beginners and the young, the popular and famous DNI dance studio founded only 18 months ago by two young dynamic dancers well known in Hong Kong and Taiwan, Dana Frigoli and Pablo Villaraza. Under their coaching, the studio has turned out four finalists in the annual World Tango Championship Competition, the equivalent of the Wimbledon in tennis.

Dana and Pablo have created a style that combines the rigour of classical tango with individual creativity allowing the students to improvise according his or her physical uniqueness and, more importantly for beginners, a method that is user-friendly.

"Not everyone is built the same, and therefore it is wrong to insist that each must dance the way the classic tango is usually taught," Dana said.

The studio (http://www.estudiodnitango. com.ar) is a home to many from all over the world. At the reception area, students and teachers waiting for their class to begin often just invite each other to dance impromptu.

Buenos Aires never sleeps, and many restaurants stay open till well past midnight. There are at least 40 milongas or tango dance halls, forming part of the city's nightlife and attracting dancers of all ages to tango till dawn.

Good dancing shoes are a must. For ladies the best place is Comme Il Faut in exclusive Recoleta, 1239 Arenales. All shoes are hand-made and the shop is invariably packed with stylish women who wear them as street shoes.

No one should leave Buenos Aires without going to watch a professional show and the best is at Esquina Carlos Gardel (http://www.esquinacarlosgardel.com.ar). The owner and founder, Juan Fabbri, is the Godfather of tango. To be asked to perform there is an honour even for already famous maestros.

When Juan and his beautiful wife, Dolores, the artistic director of their show, go to a rare midnight milonga to dance, it is a scene out of the movie, Godfather. When they make their entrance, a throng gathers around them. Tango maestros hug them to pay their respect: everyone knows Juan is the kingpin of all the tango impresarios in Argentina.

Argentina may be far from Asia, but one can easily find magic in its culture, its wine and its flamboyantly stylish and seductive national dance.

Six in 10 Americans say they believe a third world war is likely in their lifetime, according to a recent Associated Press poll. "I feel like we're in a world war right now," Susan Aser, an estate agent from New York state, was quoted as saying.

The wars in Afghanistan and Iraq, September 11 and last month's bombings in London and Sharm el-Sheikh, Egypt, all seem to reinforce Ms Aser's feelings. This enemy, deviating from a millennium-old pattern, has no front line, no uniform, no nationality and no borders. He is practically invisible. We do, however, know the enemy is driven by religious precepts and a hatred of the west and its Muslim allies.

Egypt, Saudi Arabia and the majority of Iraqi people who want to have a better life are targets of their suicide bombs. Other countries, Muslim or not, expect the worst. Above all else, these radical Islamic terrorists hate the United States and Britain, the two ultimate symbols of the west.

It may be true that the Iraqi invasion had something to do with the continuing terror. But September 11 happened before the invasion. It may also be true that the long Israeli-Palestinian conflicts have something to do with the motivation of these terrorists.

If true, it is puzzling why they don't go and fight the Israelis instead. Taking on the Americans and the British entails risks that the terrorists do not seem to have properly evaluated.

They may well believe the clich?that the west is so materialistic, so decadent, so against what the Prophet Mohammed taught that these two countries are ready to topple with only a few bombs. The notion of the decadent west ready to keel over and die is not new. The Chinese Marxists certainly believed so for many years.

Judging by what they do in the mainland these days, however, the communists have paid the west the ultimate compliment by copying it wholesale.

But the Islamic radicals seem to cling to the belief that they can bring the west to its knees. By taking on the US and the UK, the terrorists have picked the wrong adversaries. The British, especially, have a tenacity that historically has been underestimated by their foes. Americans can be a little short of patience; but not Britons, who have a long history of conflicts within their own borders and around the world, and have come out on top.

They lived through two world wars and the Irish Republican Army attacks, almost with nonchalance.

A few generations ago, the British ran the world's largest and most successful global empire. They left behind a legacy of public governance, common law, lasting prosperity, a global language and sufficient goodwill that is still appreciated by its former colonies and commonwealth countries. Among them is Malaysia, the most well-run and prosperous Muslim country on the planet.

British public management was paid its ultimate compliment early this year when leaders in Beijing unceremoniously fired the super-patriotic but incompetent Tung Chee-hwa, and hired the ultimate British-trained civil servant, Donald Tsang Yum-kuen, a knight of the British Empire, to succeed Mr Tung as Hong Kong's chief executive.

The terrorists would be well advised to do at least two things: visit a psychiatrist to understand - and then to better manage - their anger. Second, they should reconsider their choice of the British as their enemy.

Their record of beating terrorists, big and small, is not something any half-intelligent fighter wants to bet against.

Sin-ming Shaw is a former visiting fellow at Oriel College, Oxford University

Last Thursday, London and Europe observed two minutes of silence to commemorate and honour those killed in the London bombings. I was among those who observed the silence, at noon, with barely controlled emotions because I am, now, a Londoner on at least two levels.

First, I live here. Any random attack on its inhabitants could be an attack on me. I could easily have been among the victims on the Tube, as I had plans to do some work in the library at the School of Oriental and African Studies, at the University of London. The nearest Underground station is Russell Square, where scores died.

Second, during the memorial silence, one of the signs displayed read: "One World, One City." London is a prime example of that sentiment.

Not even New York, my former home, matches the cosmopolitan culture that has evolved in London. I believe this city is a far more multicultural, cosmopolitan, tolerant, vivacious, creative metropolis. I lived in New York for exactly those reasons - and they have now drawn me to London.

There is another reason that I am a Londoner. The late US president John F. Kennedy famously declared: "Ich bin ein Berliner" (I am a Berliner), on the Berlin Wall in 1963. On the day after September 11, Le Monde, the premier French newspaper, declared on its front page: "We are all Americans."

These sentiments of solidarity were less about politics than about sharing certain basic values - human freedom and the individual's right to life, liberty and happiness. London captures these sentiments like no other city I know. I am therefore proud to call myself a Londoner.

The old global dividing lines pitched rich countries against poor ones, Christians versus Muslims, Jews against Arabs, and so on. But now, all that is obsolete.

There is only one relevant demarcation line in today's increasingly globalised world: it cuts across nationalities, cultures, races and religions, dividing people into the "smart" and the "dumb".

In China, for instance, the "smart" ignore the official, nationalistic jingoism and go straight from the best universities to the best companies. In India, the smart ignore their caste and scramble for a place at the India Institute of Technology.

The "dumb" believe that selected excerpts from the Koran, Bible, Communist Manifesto or Mao Zedong Thought are sufficient intellectual and moral guides to live a better life. These simplistic tracts lead to only one end: the dead one.

Many say it is impossible to fight fanatics on the streets of Baghdad or London. But it is not true that such nihilistic terrorism cannot be defeated. The history of the world is full of positive thinking and increasing human freedoms. These freedoms are based on science and humanistic values that promote the individual's right to life, liberty and happiness.

Nihilism, class hatred, imperialism, dictatorships of any hue - political or religious - have never lasted. And they will not last. In the end, the majority in the Islamic world will be the ultimate disciplinarians of these wayward, "dumb" fanatics who seek only destruction, not knowing they are parodying a famous Mao Zedong sound bite: "Without destruction, no construction."

By "construction", Mao meant a country modelled after his megalomaniacal image. It failed. What would "construction" mean to the bombers? A religious society presided over by medieval Islamic leaders who think the Koran is the only book to read? Or led by Osama bin Laden? Whatever they thought would come after "destruction", it is clear nothing constructive will follow.

They, like all nihilists before them, will fail.

Sin-ming Shaw, a visiting scholar at Columbia University, currently resides in London

The next century can be Asia's if it abandons its Confucian ways and embraces the wisdom of democracy and capitalism
The dramatic recovery in Asian financial markets may have revived the pre-crisis belief among the region's élite that the next century belongs to Asia. Hubris is high among this group, but without an honest assessment of Asia's flaws, the region will fail to respond to the challenge from the West--just as it did in the previous century.
The predominant Asian view remains that the West enjoys an advantage only in science and technology--and that this can be appropriated without sacrificing any of the supposedly superior Eastern values and institutions. This view is fundamentally flawed since it ignores the inseparable link between scientific progress and the social factors that allow the human mind to soar. Asia must recognize that what the West has done is not mysterious--and not, in fact, uniquely Western. The foundation of its success rests on a few simple but powerful propositions. To bring out the best and most creative in human beings, a society should be organized democratically in its economy and its politics. Put simply, in economics one votes with a checkbook; in politics with a ballot. Markets must be free, ownership must be private, rules must be transparent and fairly applied. In politics, the rule of law must reign, changes must be constitutional, conflicts should be resolved through the courts and the ballot box. Above all, education is the best investment.
To figure out why Asia failed to arrive at that conclusion before the West did, begin with Confucius, the oft-misquoted Chinese thinker of 2,500 years ago whose ideas still shape Chinese, Korean and Japanese societies. The Confucian precept of letting a ruler be a ruler, and a subject be a subject, has been used by every Chinese leader (except those in present-day Taiwan) to keep the people in their place. It is a top-down model in which each person is assigned a pre-determined moral and behavioral role. Rulers, then and now, conveniently ignored the second half of the Confucian axiom: a ruler cannot govern without the people's consent, and the penalty for unpopular, despotic rule is loss of the Mandate of Heaven. This neglect was, of course, deliberate.
The first Asian country not to have its feudal values and pride get in the way of progress was Japan. In 1868, its Meiji leaders wisely grasped the essence of Western science and technology based on analysis and empirical evidence, not moral axioms and seniority. With this insight, the Meiji restorers began a process of reform that was to make Japan Asia's most advanced country, bypassing China, the region's traditional teacher.
Confucius's erroneous view of human nature and the hierarchical structure rulers imposed in his name have prolonged the existence of a static society. The sage thought man was by nature good and that the ideal gentleman, a junzi, must have flawless morals and manners. A junzi does not argue with his superiors, for that would be uncivilized, therefore, immoral. Perfectly genteel, absolutely suffocating. Asia should have given more heed to Xunji, a non-conformist thinker of the Legalist school. Two centuries after Confucius, Xunji preached that man was inherently selfish in his quest for individual gain. Only with the rule of law, not moral codes, could a society properly organize itself. Had that thesis caught on, it would have helped create, long before the West did, the rule of law in China, Korea and Japan, while making the individual the driving force in society.
In economics, it is rare now to find any Asian from Surabaya to Kashgar who would dispute that the seemingly chaotic free market is a superior method of organizing production, consumption and investment. Capitalism was already thriving in the Tang dynasty of 9th century China. To respect the market is to acknowledge the intelligence of every person in society who votes with his money. Why then is that respect so often withheld from the same individual who wishes to vote his social and political preferences at the ballot box? The answer remains timeless. It would be inconvenient for the ruling élite if its Mandate of Heaven had to be renewed regularly by free and fair elections.
All societies will eventually find that the way to the Promised Land is not known only to a few wise leaders. There are no better alternatives than capitalism and democracy. Other-isms have been tried and have failed. The appropriate pace of evolving into a smoothly working market economy and democracy may vary for each society, but the end result is no longer in doubt. The secret of success is that there is no secret. Capitalism and democracy are certainly not perfect. But to borrow from Churchill, they are terrible systems save for anything else.
Asia--and China in particular--need not reinvent the wheel by searching for solutions with Asian characteristics. The issue of losing the Asian soul by embracing democracy and capitalism does not exist, for those systems are both Asian and universal. Once freed from the shackles of bankrupt ideas and arbitrary governance, the talents of Asians will flourish in the next millennium as they did in centuries past.

Sin-ming Shaw is chairman of Shaw Investment Management and a visiting scholar in Chinese history at Harvard University